UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 21, 2009
UAL CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-06033 | 36-2675207 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification Number) | ||
| 77 W. Wacker Drive, Chicago, IL | 60601 | |
| (Address of principal executive offices) | (Zip Code) |
(312) 997-8000
Registrant’s telephone number, including area code
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On January 21, 2009, UAL Corporation issued a press release announcing its financial results for the fourth quarter of 2008. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
| Exhibit No. |
Description | |
| 99.1 | Press Release issued by UAL Corporation dated January 21, 2009 |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UAL CORPORATION | ||
| By: | /s/ Kathryn A. Mikells | |
| Name: | Kathryn A. Mikells | |
| Title: | Senior Vice President and | |
| Chief Financial Officer | ||
Date: January 21, 2009
3
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1* | Press Release issued by UAL Corporation dated January 21, 2009 |
| * | Furnished herewith electronically. |
4
Exhibit 99.1
News Release
Worldwide Press Office: 312-997-8640
UAL CORPORATION REPORTS FOURTH QUARTER 2008 RESULTS
CONTINUING AGGRESSIVE ACTIONS TO POSITION COMPANY FOR
SUCCESS IN 2009
CHICAGO, Jan. 21, 2009 – UAL Corporation (NASDAQ: UAUA), the holding company whose primary subsidiary is United Airlines, reported results for the fourth quarter ended Dec. 31, 2008. The company:
| • | Reported a fourth quarter pre-tax loss of $547 million excluding non-cash, net mark-to-market hedge losses and certain accounting charges outlined in note 5 of the attached statement of consolidated operations. Including these items the company reported a pre-tax loss of $1.3 billion. |
| • | Reported basic and diluted loss per share for the fourth quarter of $4.22 excluding non-cash, net mark-to-market hedge losses and certain accounting charges. Including these items the company’s loss per share was $9.91. |
| • | Reported solid revenue performance with a 4.7 percent increase year-over-year in fourth quarter consolidated passenger unit revenue per available seat mile (PRASM), excluding Mileage Plus accounting impacts. Including these impacts, consolidated PRASM increased 2.1 percent year-over-year. |
| • | Held its mainline non-fuel unit costs per available seat mile (CASM) for the quarter, excluding certain accounting charges, to an increase of only 1.6 percent year-over-year, despite reducing mainline capacity by 11.7 percent year-over-year. Mainline CASM including fuel and certain accounting charges for the quarter was up 20.8 percent versus the fourth quarter of 2007, primarily due to the impact of hedge losses. |
| • | Raised nearly $390 million in cash in the fourth quarter through various activities including aircraft financings, asset sales and equity issuances. |
| • | Recorded its best fourth quarter on-time performance since 2004. |
The company reported a pre-tax loss, excluding non-cash, net mark-to-market hedge losses and certain accounting charges, of $547 million for the quarter. This compared to an adjusted pre-tax loss of $105 million in the fourth quarter of 2007, as the recent fall in fuel prices drove losses on fuel hedges put in place earlier in the year when prices were rising to unprecedented levels. Including these items the company’s fourth quarter pre-tax loss was $1.3 billion in 2008 compared to a pre-tax loss of $98 million in 2007.
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Fuel prices drove the company’s losses in 2008. The historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices.
“Last year was by any measure a challenging year – defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements,” said Glenn Tilton, United chairman, president and CEO. “Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009.”
Capacity Actions Drove Improved Passenger Unit Revenue Results
Total passenger revenue for the quarter decreased 8.7 percent year-over-year as consolidated capacity declined 10.6 percent, consolidated yield increased 2.4 percent and load factor decreased 0.3 points.
Domestic mainline PRASM for the fourth quarter, excluding Mileage Plus accounting impacts, was up 6.7 percent year-over-year, reflecting the company’s capacity reduction actions. Including Mileage Plus accounting impacts, the company’s domestic mainline PRASM was up 4.6 percent for the quarter.
International mainline PRASM, excluding Mileage Plus accounting impacts, was up 1.2 percent for the quarter as a result of weaker demand for international travel. Including Mileage Plus accounting impacts, the company’s international PRASM declined 1.7 percent.
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News Release
Regional Affiliate PRASM for the quarter, excluding Mileage Plus accounting impacts, was up 1.8 percent year-over-year. Including the Mileage Plus accounting impacts, regional affiliate PRASM declined 0.7 percent for the quarter.
Cargo revenue for the quarter decreased 19.3 percent year-over-year as a result of lower international capacity and weakening demand.
| Geographic Area |
4Q 2008 Passenger Revenue (millions) |
Passenger Revenue % Increase/ (Decrease) |
Adjusted PRASM1 % Increase/ (Decrease) |
PRASM % Increase/ (Decrease) |
ASM2 % Increase/ (Decrease) |
||||||||||
| Domestic |
$ | 1,989 | (10.5 | )% | 6.7 | % | 4.6 | % | (14.4 | )% | |||||
| Pacific |
700 | (16.4 | )% | 0.8 | % | (2.1 | )% | (14.7 | )% | ||||||
| Atlantic |
597 | (0.6 | )% | (0.2 | )% | (3.0 | )% | 2.4 | % | ||||||
| Latin America |
127 | (7.1 | )% | 3.7 | % | 0.8 | % | (7.9 | )% | ||||||
| Total Mainline |
$ | 3,413 | (10.1 | )% | 4.4 | % | 1.8 | % | (11.7 | )% | |||||
| Regional Affiliates |
752 | (1.7 | )% | 1.8 | % | (0.7 | )% | (1.0 | )% | ||||||
| Total Consolidated |
$ | 4,165 | (8.7 | )% | 4.7 | % | 2.1 | % | (10.6 | )% | |||||
| 1 |
PRASM adjusted for Mileage Plus effects (See Note 5 to the attached statements of consolidated operations). |
| 2 |
ASM (available seat miles) |
Continued Focus on Cost Performance
Mainline CASM, excluding fuel and certain accounting charges, was up only 1.6 percent in the fourth quarter, despite an 11.7 percent decline in mainline capacity as the company took aggressive action to remove fixed as well as variable costs from the system while reducing capacity. For the full-year 2008, mainline CASM excluding fuel and certain accounting charges was up only 1.5 percent, despite a 4.2 percent decline in capacity.
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News Release
| Fourth Quarter Increase/(Decrease) | ||||||||||||||
| Mainline | Consolidated | |||||||||||||
| 2008 | 2007 | % Chg. | 2008 | 2007 | % Chg. | |||||||||
| CASM (cents) |
14.97 | 12.39 | 20.8 | % | 15.39 | 13.08 | 17.7 | % | ||||||
| CASM excluding certain accounting charges and non-cash, net mark-to-market losses (cents) |
12.91 | 12.41 | 4.0 | % | 13.57 | 13.10 | 3.6 | % | ||||||
| CASM excluding fuel and certain accounting charges (cents) |
8.41 | 8.28 | 1.6 | % | 8.87 | 8.72 | 1.7 | % | ||||||
“Our industry continues to be challenged by a volatile fuel and revenue environment, and against that backdrop, we are delivering strong cost results even as we reduce capacity and improve quality,” said John Tague, executive vice president and chief operating officer. “Our operational performance continues to improve, benefiting from reduced capacity, new runways and, most importantly, the work of our people, who are focused on running a good airline for our customers and our investors.”
Lower Fuel Prices Resulted in Hedging Losses
The company recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million.
| Three Months Ending Dec. 31, 2008 (in millions) |
||||||||||||
| Included In Fuel Expense |
Included in Non-Operating Expense |
Total | ||||||||||
| Non-cash, net mark-to-market loss |
$ | (449 | ) | $ | (117 | ) | $ | (566 | ) | |||
| Cash net loss on settled contracts |
(142 | ) | (228 | ) | (370 | ) | ||||||
| Total recorded net losses |
$ | (591 | ) | $ | (345 | ) | $ | (936 | ) | |||
The United Building, 77 West Wacker Drive, Chicago, Illinois 60601
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News Release
Action Taken to Enhance Cash Position
The company completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter.
During the quarter, the company entered into an amendment with its largest credit card processor that suspends until Jan. 20, 2010, the requirement for United to post or maintain additional cash reserves with the processor if United’s balance of unrestricted cash, cash equivalents and short-term investments falls below $2.5 billion. In exchange for this benefit, United has granted the processor a security interest in certain United owned aircraft.
During the fourth quarter, the company generated negative $989 million of operating cash flow and negative $1.1 billion of free cash flow, defined as operating cash flow less capital expenditures. Both the operating cash flow and free cash flow include $587 million in additional net fuel hedge deposits that were paid during the quarter.
The company ended the quarter with an unrestricted cash balance of $2.0 billion, a restricted cash balance of $272 million and $965 million in cash deposits held by its fuel hedge counterparties.
Early in the first quarter of 2009 the company closed an additional aircraft financing transaction, which raised $95 million, and expects to raise approximately $160 million from a cargo facility relocation agreement with Chicago’s O’Hare International Airport. In January, the company received net proceeds of $62 million from equity issuances, and anticipates receiving an additional
The United Building, 77 West Wacker Drive, Chicago, Illinois 60601
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News Release
$27 million of net proceeds in the first quarter by completing the equity issuances that were announced in December. Altogether, the company expects to raise about $350 million from these transactions by the end of the first quarter.
“United, like many airlines across the industry, experienced significant cash pressures associated with fuel hedge positions in 2008 as oil prices declined more than $100 a barrel,” said Kathryn Mikells, senior vice president and CFO. “The cash impact, while significant, is now behind us, and we are well positioned to manage through a challenging 2009 with good expected cost performance building on our momentum from this past year.”
Income Taxes
Because of its net operating loss carry-forwards, the company expects to pay minimal cash taxes for the foreseeable future and is not recording incremental tax benefits at this time.
Significant Improvements in Operating Results
United has seen significant improvement in its operational performance during the fourth quarter as a result of its increased focus on operational execution, improvements in the schedule structure and the industry-wide reduction in capacity. The company has also benefited from the November opening of the new runway at Chicago O’Hare International Airport.
United’s on-time arrival:14 performance for the fourth quarter was 79.2 percent, the company’s best fourth quarter performance since 2004. Its cancellation rate was 1.4 percent, which is the company’s lowest fourth quarter rate since 2005. As a result of these improvements, United ranked second in on-time performance for the fourth quarter among the five major U.S. network carriers, including Continental Airlines, American Airlines, US Airways, and the combined Delta / Northwest Airlines.
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News Release
Business Highlights
| • | United began new daily non-stop passenger and cargo service between Washington, D.C., and Dubai on October 28. |
| • | United announced new daily non-stop passenger and cargo service between Washington, D.C., and both Geneva and Moscow on its newly reconfigured B767 with fully lie-flat seats in first and business class. |
| • | United and EGYPTAIR signed an agreement to offer codeshare flights, which would expand the international destinations and enhance the frequent flyer benefits offered to customers of both carriers. |
| • | United announced it will offer in-flight internet service on it p.s. transcontinental service between New York and California starting in the second half of 2009. |
| • | United became the first U.S. carrier to participate in the Asia and South Pacific Initiative to Reduce Emissions (ASPIRE). United Flight 870 on Nov. 14 from Sydney, Australia, to San Francisco saved more than 1,500 gallons of fuel and 32,000 pounds of carbon emissions using 11 fuel-savings initiatives from gate to gate. |
| • | United announced its new Premier Line service, which allows customers to purchase access to three types of specially reserved lines that offer convenience at check-in, security and boarding, including boarding for connecting flights. |
| • | United was named the best North American airline by two Asian travel publications. Travel Trade Gazette Asia honored United with the award and Business Traveler Asia-Pacific recognized United with the same accolade for the eighth consecutive year. |
| • | United became the first U.S. airline to offer overnight baggage shipping service via an overnight courier that will provide customers with a more convenient and easy way to travel – without their luggage. United’s new service, Door-to-Door Baggage, enables customers in the continental United States to conveniently ship their luggage, or other travel items like skis or golf clubs, overnight from a home or office directly to their destinations within the 48 contiguous United States. |
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News Release
2009 Outlook
United is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. The company’s capacity outlook for the first quarter 2009 and full-year 2009 is shown below:
| Capacity (Available Seat Miles) |
First Quarter 2009* |
Full-year 2009* | ||
| Domestic |
-14.0% to -13.0% | -12.5% to -11.5% | ||
| International |
-15.0% to -14.0% | -6.0% to -5.0% | ||
| Mainline |
-14.5% to -13.5% | -9.5% to -8.5% | ||
| Express |
+4.0% to +5.0% | +8.0% to +9.0% | ||
| Consolidated Domestic |
-11.0% to -10.0% | -9.0% to -8.0% | ||
| Consolidated |
-12.5% to -11.5% | -8.0% to -7.0 % | ||
| * | Increase/(Decrease) versus 2008 |
For the first quarter 2009, the company anticipates mainline CASM, excluding fuel, profit sharing and certain accounting charges, to increase between 4.0 and 5.0 percent despite a mainline capacity reduction of 14 percent. Consolidated CASM, excluding fuel, profit sharing and certain accounting charges, is also expected to increase between 4.0 and 5.0 percent.
Continuing to build on its mainline non-fuel CASM results from 2008, the company anticipates full-year 2009 mainline CASM, excluding fuel, profit sharing and certain accounting charges, to increase between 2.5 and 3.5 percent despite a 9 percent reduction in mainline capacity. Consolidated CASM, excluding fuel, profit sharing and certain accounting charges, is also expected to increase between 2.5 and 3.5 percent.
United is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30 percent, since the beginning of 2008.
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News Release
The company is also limiting its non-aircraft capital budget to $450 million for 2009 and has no capital requirements for new aircraft in 2009. The company has scheduled debt and capital lease payment obligations of $900 million in 2009.
Since the company’s Dec. 17, 2008 disclosure, it has hedged an additional 7 percent of its 2009 consolidated fuel consumption at an average price of $53 per barrel using call options. A table outlining the company’s hedge positions can be found in note 9 of the attached statement of consolidated operations.
The company estimates the following fuel prices for the first quarter based on the closing forward curve on January 16.
| Mainline Fuel Price (Price per Gallon) 1 |
Three Months Ending March 31, 2009 | ||
| Mainline Fuel price including taxes and excluding impact of hedges |
$ | 1.73 | |
| Mainline Fuel price including taxes and cash net gains or losses on settled hedges2 |
$ | 2.22 | |
| Mainline Fuel price including taxes, cash net gains or losses on settled hedges, and impact of non-cash, net mark-to-market gains or losses on settled and unsettled hedges2 |
$ | 1.83 | |
| 1 |
Based on the January 16 closing forward price |
| 2 |
Includes only the hedge gains/losses that are accounted for in the fuel expense line |
In addition to the impact of fuel hedges on fuel expense, a portion of the company’s total fuel hedge impact is recorded as a non-operating expense. The company estimates that $81 million in cash fuel hedging losses and $69 million in non-cash, net mark-to-market fuel hedging gains will be recorded in non-operating income / expense for the first quarter based on January 16 closing forward curve prices.
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News Release
The company estimates it will have the following amounts posted as fuel hedge collateral at each quarter end:
| Projected Fuel Hedge Collateral Balance at Each Quarter End | |||||||||||||||
| Jan. 19, 2009 |
Q1 2009 | Q2 2009 | Q3 2009 | Q4 2009 | |||||||||||
| Based on Jan. 16 closing forward crude oil prices |
$ | 780M | $ | 615M | $ | 315M | $ | 110M | $ | 25M | |||||
Additional details can be found in note 10 of the attached statement of consolidated operations.
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News Release
About United
United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United’s 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company’s Web site at united.com.
| * | Based on United’s flight schedule between Jan. 1, 2009 and Jan. 1, 2010. |
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this press release are forward-looking and thus reflect the company’s current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the operations and business environment of the company that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Factors that could significantly affect net earnings, revenues, expenses, costs, load factor and capacity include, without limitation, the following: the company’s ability to comply with the terms of its credit facility; the costs and availability of financing; the company’s ability to execute its business plan; the company’s ability to realize benefits from its resource optimization efforts and cost reduction initiatives; the company’s ability to attract, motivate and/or retain key employees; the company’s ability to attract and retain customers; demand for transportation in the markets in which the company operates; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices and energy refining capacity in relevant markets); the effects of any hostilities or act of war or any terrorist attack; the ability of other air carriers with whom the company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aircraft insurance; the costs of jet fuel; our ability to cost-effectively hedge against increases in the price of jet fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the costs associated with security measures and practices; labor costs; industry consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or its competitors; U.S. or foreign governmental legislation, regulation and other actions, including the effect of open skies agreements; the company’s ability to utilize its net operating losses; the ability of the company to maintain satisfactory labor relations and our ability to avoid any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth from time to time in UAL’s reports to the United States Securities and Exchange Commission. Consequently, the forward-looking statements should not be regarded as representations or warranties by the company that such matters will be realized. The company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.
The United Building, 77 West Wacker Drive, Chicago, Illinois 60601
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UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
| Three Months Ended December 31, |
% Increase/ (Decrease) |
||||||||||
| (In accordance with GAAP) | 2008 | 2007 | |||||||||
| Operating revenues: |
|||||||||||
| Passenger - United Airlines |
$ | 3,413 | $ | 3,797 | (10.1 | ) | |||||
| Passenger - Regional Affiliates |
752 | 765 | (1.7 | ) | |||||||
| Cargo |
180 | 223 | (19.3 | ) | |||||||
| Other operating revenues |
202 | 245 | (17.6 | ) | |||||||
| 4,547 | 5,030 | (9.6 | ) | ||||||||
| Operating expenses: |
|||||||||||
| Aircraft fuel (Notes 3 and 5) |
1,838 | 1,432 | 28.4 | ||||||||
| Salaries and related costs (Note 5) |
1,049 | 1,112 | (5.7 | ) | |||||||
| Regional affiliates (a) |
740 | 765 | (3.3 | ) | |||||||
| Purchased services |
328 | 366 | (10.4 | ) | |||||||
| Depreciation and amortization (Note 5) |
262 | 231 | 13.4 | ||||||||
| Aircraft maintenance materials and outside repairs |
228 | 306 | (25.5 | ) | |||||||
| Landing fees and other rent |
211 | 222 | (5.0 | ) | |||||||
| Distribution expenses |
152 | 183 | (16.9 | ) | |||||||
| Other impairments and special items (Note 5) |
125 | — | — | ||||||||
| Aircraft rent |
95 | 99 | (4.0 | ) | |||||||
| Cost of third party sales |
68 | 78 | (12.8 | ) | |||||||
| Other operating expenses (Note 5) |
263 | 300 | (12.3 | ) | |||||||
| 5,359 | 5,094 | 5.2 | |||||||||
| Loss from operations |
(812 | ) | (64 | ) | NM | ||||||
| Other income (expense): |
|||||||||||
| Interest expense |
(131 | ) | (155 | ) | (15.5 | ) | |||||
| Interest income |
12 | 66 | (81.8 | ) | |||||||
| Interest capitalized |
4 | 5 | (20.0 | ) | |||||||
| Gain on sale of investment |
— | 41 | (100.0 | ) | |||||||
| Miscellaneous, net (Note 5) |
(373 | ) | 9 | — | |||||||
| (488 | ) | (34 | ) | NM | |||||||
| Loss before income taxes and equity in earnings of affiliates |
(1,300 | ) | (98 | ) | NM | ||||||
| Income tax expense (benefit) (Note 5) |
5 | (43 | ) | — | |||||||
| Loss before equity in earnings of affiliates |
(1,305 | ) | (55 | ) | NM | ||||||
| Equity in earnings of affiliates, net of tax |
2 | 2 | — | ||||||||
| Net loss |
$ | (1,303 | ) | $ | (53 | ) | NM | ||||
| Loss per share, basic and diluted |
$ | (9.91 | ) | $ | (0.47 | ) | |||||
| Weighted average shares, basic and diluted |
131.6 | 117.7 | |||||||||
See accompanying notes.
| (a) | Regional affiliates expense includes regional aircraft rent expense. See Note 2 for more information. |
| NM | Not meaningful. |
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UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
| Twelve Months Ended December 31, |
% Increase/ (Decrease) |
||||||||||
| (In accordance with GAAP) | 2008 | 2007 | |||||||||
| Operating revenues: |
|||||||||||
| Passenger - United Airlines |
$ | 15,337 | $ | 15,254 | 0.5 | ||||||
| Passenger - Regional Affiliates |
3,098 | 3,063 | 1.1 | ||||||||
| Cargo |
854 | 770 | 10.9 | ||||||||
| Special operating items (Note 5) |
— | 45 | (100.0 | ) | |||||||
| Other operating revenues |
905 | 1,011 | (10.5 | ) | |||||||
| 20,194 | 20,143 | 0.3 | |||||||||
| Operating expenses: |
|||||||||||
| Aircraft fuel (Notes 3 and 5) |
7,722 | 5,003 | 54.3 | ||||||||
| Salaries and related costs (Note 5) |
4,311 | 4,261 | 1.2 | ||||||||
| Regional affiliates (a) |
3,248 | 2,941 | 10.4 | ||||||||
| Purchased services (Note 5) |
1,375 | 1,346 | 2.2 | ||||||||
| Aircraft maintenance materials and outside repairs |
1,096 | 1,166 | (6.0 | ) | |||||||
| Depreciation and amortization (Note 5) |
932 | 925 | 0.8 | ||||||||
| Landing fees and other rent |
862 | 876 | (1.6 | ) | |||||||
| Distribution expenses |
710 | 779 | (8.9 | ) | |||||||
| Aircraft rent |
409 | 406 | 0.7 | ||||||||
| Cost of third party sales |
272 | 316 | (13.9 | ) | |||||||
| Goodwill impairment (Note 5) |
2,277 | — | — | ||||||||
| Other impairments and special items (Note 5) |
339 | (44 | ) | — | |||||||
| Other operating expenses (Note 5) |
1,079 | 1,131 | (4.6 | ) | |||||||
| 24,632 | 19,106 | 28.9 | |||||||||
| Earnings (loss) from operations |
(4,438 | ) | 1,037 | — | |||||||
| Other income (expense): |
|||||||||||
| Interest expense |
(523 | ) | (661 | ) | (20.9 | ) | |||||
| Interest income |
112 | 257 | (56.4 | ) | |||||||
| Interest capitalized |
20 | 19 | 5.3 | ||||||||
| Gain on sale of investment |
— | 41 | (100.0 | ) | |||||||
| Miscellaneous, net (Note 5) |
(550 | ) | 2 | — | |||||||
| (941 | ) | (342 | ) | 175.1 | |||||||
| Earnings (loss) before income taxes and equity in earnings of affiliates |
(5,379 | ) | 695 | — | |||||||
| Income tax expense (benefit) (Note 5) |
(25 | ) | 297 | — | |||||||
| Earnings (loss) before equity in earnings of affiliates |
(5,354 | ) | 398 | — | |||||||
| Equity in earnings of affiliates, net of tax |
6 | 5 | 20.0 | ||||||||
| Net income (loss) |
$ | (5,348 | ) | $ | 403 | — | |||||
| Earnings (loss) per share, basic |
$ | (42.21 | ) | $ | 3.34 | ||||||
| Earnings (loss) per share, diluted |
$ | (42.21 | ) | $ | 2.79 | ||||||
| Weighted average shares, basic |
126.8 | 117.4 | |||||||||
| Weighted average shares, diluted |
126.8 | 153.7 | |||||||||
See accompanying notes.
| (a) | Regional affiliates expense includes regional aircraft rent expense. See Note 2 for more information. |
| NM | Not meaningful. |
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UAL CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
| Three Months Ended December 31, |
% Increase/ |
Twelve Months Ended December 31, |
% Increase/ |
|||||||||||||||||||
| (In accordance with GAAP) | 2008 | 2007 | (Decrease) | 2008 | 2007 | (Decrease) | ||||||||||||||||
| Cash flows provided (used) by operating activities (a) |
$ | (989 | ) | $ | 132 | — | $ | (1,239 | ) | $ | 2,134 | — | ||||||||||
| Cash flows provided (used) by investing activities: |
||||||||||||||||||||||
| Net (purchases) sales of short-term investments |
— | 604 | (100.0 | ) | 2,295 | (1,983 | ) | — | ||||||||||||||
| Additions to property and equipment |
(80 | ) | (230 | ) | (65.2 | ) | (415 | ) | (658 | ) | (36.9 | ) | ||||||||||
| Proceeds from the sale of investment |
— | 128 | (100.0 | ) | — | 128 | (100.0 | ) | ||||||||||||||
| Purchases of EETC securities |
— | (20 | ) | (100.0 | ) | — | (96 | ) | (100.0 | ) | ||||||||||||
| (Increase) decrease in restricted cash (b) |
(24 | ) | 32 | — | 484 | 91 | 431.9 | |||||||||||||||
| Proceeds from asset sale leaseback |
215 | — | — | 274 | — | — | ||||||||||||||||
| Proceeds from litigation on advance deposits |
— | — | — | 41 | — | — | ||||||||||||||||
| Proceeds from the sale of property and equipment |
51 | 5 | NM | 94 | 19 | 394.7 | ||||||||||||||||
| Other, net |
(17 | ) | (22 | ) | (22.7 | ) | (52 | ) | (61 | ) | (14.8 | ) | ||||||||||
| 145 | 497 | (70.8 | ) | 2,721 | (2,560 | ) | — | |||||||||||||||
| Cash flows provided (used) by financing activities: |
||||||||||||||||||||||
| Repayment of Credit Facility |
— | (500 | ) | (100.0 | ) | (18 | ) | (1,495 | ) | (98.8 | ) | |||||||||||
| Repayment of other debt |
(128 | ) | (108 | ) | 18.5 | (666 | ) | (1,257 | ) | (47.0 | ) | |||||||||||
| Special distribution |
— | — | — | (253 | ) | — | — | |||||||||||||||
| Principal payments under capital leases |
(26 | ) | (117 | ) | (77.8 | ) | (235 | ) | (177 | ) | 32.8 | |||||||||||
| Decrease in capital lease deposits |
1 | 80 | (98.8 | ) | 155 | 80 | 93.8 | |||||||||||||||
| Increase (decrease) in deferred financing costs |
(2 | ) | 4 | — | (120 | ) | (18 | ) | NM | |||||||||||||
| Proceeds from issuance of secured notes |
— | — | — | 337 | 694 | (51.4 | ) | |||||||||||||||
| Proceeds from the sale of stock |
107 | — | — | 107 | — | — | ||||||||||||||||
| Other, net |
— | 8 | (100.0 | ) | (9 | ) | 26 | — | ||||||||||||||
| (48 | ) | (633 | ) | (92.4 | ) | (702 | ) | (2,147 | ) | (67.3 | ) | |||||||||||
| Increase (decrease) in cash and cash equivalents during the period |
(892 | ) | (4 | ) | NM | 780 | (2,573 | ) | — | |||||||||||||
| Cash and cash equivalents at beginning of the period |
2,931 | 1,263 | 132.1 | 1,259 | 3,832 | (67.1 | ) | |||||||||||||||
| Cash and cash equivalents at end of the period |
$ | 2,039 | $ | 1,259 | 62.0 | $ | 2,039 | $ | 1,259 | 62.0 | ||||||||||||
| Reconciliation of cash and cash equivalents to total cash and cash equivalents, short-term investments and restricted cash:
|
||||||||||||||||||||||
| As of December 31, |
% Increase/ |
|||||||||||||||||||||
| 2008 | 2007 | (Decrease) | ||||||||||||||||||||
| Cash and cash equivalents |
$ | 2,039 | $ | 1,259 | 62.0 | |||||||||||||||||
| Short-term investments |
— | 2,295 | (100.0 | ) | ||||||||||||||||||
| Restricted cash (b) |
272 | 756 | (64.0 | ) | ||||||||||||||||||
| Total cash and cash equivalents, short-term investments and restricted cash (b) |
$ | 2,311 | $ | 4,310 | (46.4 | ) | ||||||||||||||||
| (a) | See Note 5[h] for the Company’s computation of free cash flow. |
| (b) | Restricted cash decreased significantly during the year ended December 31, 2008 due to the posting of letters of credit for workers’ compensation obligations and an amendment of the Company’s largest credit card processing agreement with respect to credit card ticket sales reserves. |
| NM | Not meaningful. |
14
CONSOLIDATED NOTES (UNAUDITED)
| (1) | UAL Corporation (“UAL” or the “Company”) is a holding company whose principal subsidiary is United Air Lines, Inc. (“United”). On December 9, 2002, UAL, United and twenty-six direct and indirect wholly-owned subsidiaries filed Chapter 11 petitions for relief in the U.S. Bankruptcy Court for the Northern District of Illinois. On February 1, 2006 (the “Effective Date”), the Company emerged from Chapter 11. In connection with its emergence from Chapter 11 bankruptcy protection, the Company implemented fresh-start reporting in accordance with American Institute of Certified Public Accountants’ Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” on the Effective Date. The application of fresh-start reporting resulted in significant changes to the historical financial statements. |
| (2) | United has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. Under these agreements, United pays the regional carriers contractually agreed fees for crew expenses, maintenance expenses and other costs of operating these flights. These costs include aircraft rents of $104 million and $105 million for the three months ended December 31, 2008 and 2007, respectively, and $413 million and $425 million for the twelve months ended December 31, 2008 and 2007, respectively, which are included in regional affiliate expense in our Statements of Consolidated Operations. |
| (3) | UAL’s results of operations include aircraft fuel expense for both United mainline jet operations and regional affiliates. Aircraft fuel expense incurred as a result of the Company’s regional affiliates’ operations is reflected in Regional affiliates operating expense. In accordance with UAL’s agreement with its regional affiliates, these costs are incurred by the Company. Fuel hedging gains or losses are not allocated to Regional affiliates fuel expense. |
| Year-Over-Year Impact of Fuel Expense United Mainline and Regional Affiliate Operations |
||||||||||||||||||||
| Three Months Ended December 31, |
% Change |
Twelve Months Ended December 31, |
% Change |
|||||||||||||||||
| (In millions, except per gallon) | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Total Mainline fuel expense |
$ | 1,838 | $ | 1,432 | 28.4 | $ | 7,722 | $ | 5,003 | 54.3 | ||||||||||
| Non-cash, net mark-to-market gains (losses) in mainline fuel |
(449 | ) | 7 | — | (568 | ) | 20 | — | ||||||||||||
| Mainline fuel expense excluding non-cash, net mark-to-market gains (losses) |
1,389 | 1,439 | (3.5 | ) | 7,154 | 5,023 | 42.4 | |||||||||||||
| Regional affiliates fuel expense |
247 | 262 | (5.7 | ) | 1,257 | 915 | 37.4 | |||||||||||||
| United system fuel expense excluding non-cash, net mark-to-market gains (losses) |
$ | 1,636 | $ | 1,701 | (3.8 | ) | $ | 8,411 | $ | 5,938 | 41.6 | |||||||||
| Mainline fuel consumption (gallons) |
491 | 566 | (13.3 | ) | 2,182 | 2,292 | (4.8 | ) | ||||||||||||
| Mainline average jet fuel price per gallon (in cents) |
374.3 | 253.0 | 47.9 | 353.9 | 218.3 | 62.1 | ||||||||||||||
| Mainline average jet fuel price per gallon excluding non-cash, net mark-to-market gains (losses) (in cents) |
282.9 | 254.2 | 11.3 | 327.9 | 219.2 | 49.6 | ||||||||||||||
| Regional affiliates fuel consumption (gallons) |
92 | 93 | (1.1 | ) | 371 | 377 | (1.6 | ) | ||||||||||||
| Regional affiliates average jet fuel price per gallon (in cents) |
268.5 | 281.7 | (4.7 | ) | 338.8 | 242.7 | 39.6 | |||||||||||||
| (4) | The tables below set forth certain operating statistics by geographic region and the Company’s mainline, regional affiliates and consolidated operations, excluding special revenue items and the impact of Mileage Plus: |
(% change from prior year)
| Three Months Ended December 31, 2008 |
Domestic | Pacific | Atlantic | Latin | Mainline | Regional Affiliates |
Consolidated | ||||||||||||||
| Passenger revenues |
(8.6 | ) | (13.9 | ) | 2.3 | (4.5 | ) | (7.9 | ) | 0.8 | (6.4 | ) | |||||||||
| ASM |
(14.4 | ) | (14.7 | ) | 2.4 | (7.9 | ) | (11.7 | ) | (1.0 | ) | (10.6 | ) | ||||||||
| RPM |
(12.6 | ) | (17.6 | ) | (1.3 | ) | (14.6 | ) | (12.1 | ) | (0.3 | ) | (10.9 | ) | |||||||
| PRASM |
6.7 | 0.8 | (0.2 | ) | 3.7 | 4.4 | 1.8 | 4.7 | |||||||||||||
| Yield [a] |
4.4 | 5.2 | 2.8 | 9.8 | 4.8 | 1.1 | 5.1 | ||||||||||||||
| Load factor (points) |
1.7 | (2.7 | ) | (3.0 | ) | (5.6 | ) | (0.3 | ) | 0.6 | (0.3 | ) | |||||||||
| Twelve Months Ended December 31, 2008 |
Domestic | Pacific | Atlantic | Latin | Mainline | Regional Affiliates |
Consolidated | ||||||||||||||
| Passenger revenues |
(0.8 | ) | (1.7 | ) | 12.3 | 7.2 | 1.3 | 1.9 | 1.4 | ||||||||||||
| ASM |
(7.8 | ) | (4.8 | ) | 11.0 | (2.8 | ) | (4.2 | ) | (0.8 | ) | (3.9 | ) | ||||||||
| RPM |
(8.5 | ) | (9.4 | ) | 7.9 | (5.5 | ) | (6.3 | ) | (3.9 | ) | (6.0 | ) | ||||||||
| PRASM |
7.6 | 3.2 | 1.2 | 10.3 | 5.8 | 2.8 | 5.5 | ||||||||||||||
| Yield [a] |
8.3 | 8.5 | 3.4 | 14.1 | 8.0 | 6.1 | 7.9 | ||||||||||||||
| Load factor (points) |
(0.6 | ) | (3.9 | ) | (2.3 | ) | (2.2 | ) | (1.7 | ) | (2.4 | ) | (1.8 | ) | |||||||
| [a] | Yields for geographic regions exclude charter revenue, industry reduced fares, passenger charges and related revenue passenger miles. |
15
CONSOLIDATED NOTES (UNAUDITED)
| (5) | The Company incurred significant charges related to tangible and intangible asset impairments, severance and other charges that significantly impacted its results in the three and twelve months ended December 31, 2008. Collectively, these charges are identified as “impairments and other charges” in the Regulation G reconciliations below. These items consist of the following: |
| Three Months Ended December 31, 2008 |
Twelve Months Ended December 31, 2008 |
|||||||||
| Income Statement Classification | ||||||||||
| Goodwill impairment |
$ | — | $ | 2,277 | Goodwill impairment | |||||
| Intangible asset impairments |
— | 64 | ||||||||
| Aircraft and deposit impairments |
107 | 250 | ||||||||
| Other impairments |
107 | 314 | ||||||||
| Lease termination and special items |
18 | 25 | ||||||||
| Total other impairments and special items |
125 | 339 | Other impairments and special items | |||||||
| Severance |
18 | 106 | Salaries and related costs | |||||||
| Employee benefit charges |
29 | 57 | (a) | Salaries and related costs | ||||||
| Litigation-related settlement gain |
— | (29 | ) | Other operating expenses | ||||||
| Purchased services charges |
— | 26 | (b) | Purchased services | ||||||
| Net gain on asset sales |
(11 | ) | (3 | ) | Depreciation and amortization | |||||
| Accelerated depreciation related to aircraft groundings |
26 | 34 | Depreciation and amortization | |||||||
| Total other charges |
62 | 191 | ||||||||
| Total impairments, special items and other charges |
187 | 2,807 | ||||||||
| Operating non-cash, net mark-to-market losses |
449 | 568 | Aircraft fuel | |||||||
| Total operating expense impact |
636 | 3,375 | ||||||||
| Non-operating non-cash, mark-to-market losses |
117 | 279 | Miscellaneous, net | |||||||
| Pre-tax impairments and other charges |
753 | 3,654 | ||||||||
| Income tax expense (benefit) on intangible asset impairments and asset sales |
(5 | ) | (31 | ) | Income tax expense (benefit) | |||||
| Impairments and other charges, net of tax |
$ | 748 | $ | 3,623 | ||||||
| (a) | Amount relates to additional charges to adjust certain employee benefit obligations. |
| (b) | Amount relates to expense for certain projects and transactions that have been terminated or indefinitely postponed by the Company. |
The Company did not classify any items as special items during the fourth quarter of 2007, but it did have special items for the year ended December 31, 2007, which include the following:
In 2007, the Company recorded a change in estimate of $59 million for certain liabilities relating to bankruptcy administrative claims. This adjustment resulted directly from the progression of the Company’s ongoing efforts to resolve certain bankruptcy pre-confirmation contingencies. The Company classified these changes in estimate as special items in the accompanying financial statements, as they are related directly to the ongoing resolution of bankruptcy administrative claims. This classification is consistent with classification used to report the effects of similar claims resolved in other quarterly periods since exit from bankruptcy. The Company therefore recorded a special operating revenue credit of $45 million, and a special operating expense credit of $14 million for these changes in estimate.
The Company also recorded special operating expense credits of $30 million in the twelve months ended December 31, 2007 related to bankruptcy facility lease secured interest litigation. The Company separately recorded a $26 million benefit from a change in estimate to certain other contingent liabilities, which was recorded as a credit to mainline passenger revenues of $22 million, and to regional affiliate revenues of $4 million. The Company classified this benefit to passenger revenue, since it represents an adjustment to contingent liabilities based largely on changes in underlying facts and circumstances occurring during the year ended December 31, 2007.
See Notes 6 and 7, below, for additional information related to the impacts of accounting for Mileage Plus on the Company’s results of operations.
Pursuant to SEC Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. The Company believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. The Company also believes that adjusting for special items, and other items unusual or infrequent in nature, is useful to investors because they are non-recurring items not indicative of the Company’s on-going performance. In addition, the Company adjusts for Mileage Plus impacts for better comparison to several of its peers as many still apply the incremental cost method of accounting to their loyalty plans. The Company does not apply hedge accounting. The Company believes that excluding unrealized gains/losses related to the mark-to-market of its fuel hedge positions provides management and investors with a better perspective of its performance and comparison to its peers because the unrealized gains/losses relate to future period fuel purchases and many of our peers apply FAS 133 hedge accounting.
The tables below set forth the reconciliation of GAAP and non-GAAP financial measures for certain operating statistics that are used in determining key indicators such as adjusted passenger revenue per revenue passenger mile (“Yield”), operating revenue per available seat mile (“RASM”), operating margin, net income (loss) and operating expense per available seat mile (“CASM”).
| Three Months Ended December 31, |
% Change |
Twelve Months Ended December 31, |
% Change |
|||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
| [a] Yield (In millions) |
||||||||||||||||||||||
| Mainline |
||||||||||||||||||||||
| Passenger - United Airlines |
$ | 3,413 | $ | 3,797 | (10.1 | ) | $ | 15,337 | $ | 15,254 | 0.5 | |||||||||||
| Add: Income from special item |
— | — | — | — | 37 | (100.0 | ) | |||||||||||||||
| Less: industry reduced fares and passenger charges |
(11 | ) | (11 | ) | — | (46 | ) | (45 | ) | 2.2 | ||||||||||||
| Mainline adjusted passenger revenue |
$ | 3,402 | $ | 3,786 | (10.1 | ) | $ | 15,291 | $ | 15,246 | 0.3 | |||||||||||
| Mainline revenue passenger miles |
24,517 | 27,890 | (12.1 | ) | 110,061 | 117,399 | (6.3 | ) | ||||||||||||||
| Adjusted mainline yield (in cents) |
13.88 | 13.57 | 2.3 | 13.89 | 12.99 | 6.9 | ||||||||||||||||
| Passenger - United Airlines |
$ | 3,413 | $ | 3,797 | (10.1 | ) | $ | 15,337 | $ | 15,254 | 0.5 | |||||||||||
| Less: industry reduced fares and passenger charges |
(11 | ) | (11 | ) | — | (46 | ) | (45 | ) | 2.2 | ||||||||||||
| Mainline adjusted passenger revenue |
$ | 3,402 | $ | 3,786 | (10.1 | ) | $ | 15,291 | $ | 15,209 | 0.5 | |||||||||||
| Adjusted mainline yield (in cents) |
13.88 | 13.57 | 2.3 | 13.89 | 12.95 | 7.3 | ||||||||||||||||
| Mainline adjusted passenger revenue |
$ | 3,402 | $ | 3,786 | (10.1 | ) | $ | 15,291 | $ | 15,209 | 0.5 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
39 | 50 | (22.0 | ) | 139 | 230 | (39.6 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (100 | ) | (100.0 | ) | — | (204 | ) | (100.0 | ) | ||||||||||||
| Mainline adjusted passenger revenue |
$ | 3,441 | $ | 3,736 | (7.9 | ) | $ | 15,430 | $ | 15,235 | 1.3 | |||||||||||
| Adjusted mainline yield (in cents) |
14.04 | 13.40 | 4.8 | 14.02 | 12.98 | 8.0 | ||||||||||||||||
| Regional Affiliates |
||||||||||||||||||||||
| Passenger - United Express |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,063 | 1.1 | |||||||||||
| Add: Income from special item |
— | — | — | — | 8 | (100.0 | ) | |||||||||||||||
| Regional affiliates passenger revenue |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,071 | 0.9 | |||||||||||
| Regional affiliates revenue passenger miles |
3,003 | 3,013 | (0.3 | ) | 12,155 | 12,649 | (3.9 | ) | ||||||||||||||
| Regional affiliates yield (in cents) |
25.04 | 25.39 | (1.4 | ) | 25.49 | 24.28 | 5.0 | |||||||||||||||
| Passenger - United Express |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,063 | 1.1 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
9 | 11 | (18.2 | ) | 28 | 47 | (40.4 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (21 | ) | (100.0 | ) | — | (42 | ) | (100.0 | ) | ||||||||||||
| Regional affiliates adjusted passenger revenue |
$ | 761 | $ | 755 | 0.8 | $ | 3,126 | $ | 3,068 | 1.9 | ||||||||||||
| Adjusted regional affiliates yield (in cents) |
25.34 | 25.06 | 1.1 | 25.72 | 24.25 | 6.1 | ||||||||||||||||
16
CONSOLIDATED NOTES (UNAUDITED)
| Three Months Ended December 31, |
% Change |
Twelve Months Ended December 31, |
% Change |
|||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
| Consolidated |
||||||||||||||||||||||
| Consolidated passenger revenue |
$ | 4,165 | $ | 4,562 | (8.7 | ) | $ | 18,435 | $ | 18,317 | 0.6 | |||||||||||
| Add: Income from special item |
— | — | — | — | 45 | (100.0 | ) | |||||||||||||||
| Less: industry reduced fares and passenger charges |
(11 | ) | (11 | ) | — | (46 | ) | (45 | ) | 2.2 | ||||||||||||
| Consolidated adjusted passenger revenue |
$ | 4,154 | $ | 4,551 | (8.7 | ) | $ | 18,389 | $ | 18,317 | 0.4 | |||||||||||
| Consolidated revenue passenger miles |
27,520 | 30,903 | (10.9 | ) | 122,216 | 130,048 | (6.0 | ) | ||||||||||||||
| Adjusted consolidated yield (in cents) |
15.09 | 14.73 | 2.4 | 15.05 | 14.08 | 6.9 | ||||||||||||||||
| Consolidated passenger revenue |
$ | 4,165 | $ | 4,562 | (8.7 | ) | $ | 18,435 | $ | 18,317 | 0.6 | |||||||||||
| Less: industry reduced fares and passenger charges |
(11 | ) | (11 | ) | — | (46 | ) | (45 | ) | 2.2 | ||||||||||||
| Consolidated adjusted passenger revenue |
$ | 4,154 | $ | 4,551 | (8.7 | ) | $ | 18,389 | $ | 18,272 | 0.6 | |||||||||||
| Adjusted consolidated yield (in cents) |
15.09 | 14.73 | 2.4 | 15.05 | 14.05 | 7.1 | ||||||||||||||||
| Consolidated adjusted passenger revenue |
$ | 4,154 | $ | 4,551 | (8.7 | ) | $ | 18,389 | $ | 18,272 | 0.6 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
48 | 61 | (21.3 | ) | 167 | 277 | (39.7 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (121 | ) | (100.0 | ) | — | (246 | ) | (100.0 | ) | ||||||||||||
| Consolidated adjusted passenger revenue |
$ | 4,202 | $ | 4,491 | (6.4 | ) | $ | 18,556 | $ | 18,303 | 1.4 | |||||||||||
| Adjusted consolidated yield (in cents) |
15.27 | 14.53 | 5.1 | 15.18 | 14.07 | 7.9 | ||||||||||||||||
| [b] PRASM (In millions) |
||||||||||||||||||||||
| Mainline |
||||||||||||||||||||||
| Passenger - United Airlines |
$ | 3,413 | $ | 3,797 | (10.1 | ) | $ | 15,337 | $ | 15,254 | 0.5 | |||||||||||
| Add: Income from special item |
— | — | — | — | 37 | (100.0 | ) | |||||||||||||||
| Mainline passenger revenue |
$ | 3,413 | $ | 3,797 | (10.1 | ) | $ | 15,337 | $ | 15,291 | 0.3 | |||||||||||
| Mainline available seat miles |
30,857 | 34,949 | (11.7 | ) | 135,861 | 141,890 | (4.2 | ) | ||||||||||||||
| Mainline PRASM (in cents) |
11.06 | 10.86 | 1.8 | 11.29 | 10.78 | 4.7 | ||||||||||||||||
| Passenger - United Airlines |
$ | 3,413 | $ | 3,797 | (10.1 | ) | $ | 15,337 | $ | 15,254 | 0.5 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
39 | 50 | (22.0 | ) | 139 | 230 | (39.6 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (100 | ) | (100.0 | ) | — | (204 | ) | (100.0 | ) | ||||||||||||
| Mainline adjusted passenger revenue |
$ | 3,452 | $ | 3,747 | (7.9 | ) | $ | 15,476 | $ | 15,280 | 1.3 | |||||||||||
| Adjusted mainline PRASM (in cents) |
11.19 | 10.72 | 4.4 | 11.39 | 10.77 | 5.8 | ||||||||||||||||
| Regional Affiliates |
||||||||||||||||||||||
| Passenger - Regional Affiliates |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,063 | 1.1 | |||||||||||
| Add: Income from special item |
— | — | — | — | 8 | (100.0 | ) | |||||||||||||||
| Regional affiliates passenger revenue |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,071 | 0.9 | |||||||||||
| Regional affiliates available seat miles |
3,959 | 3,999 | (1.0 | ) | 16,164 | 16,301 | (0.8 | ) | ||||||||||||||
| Regional affiliates PRASM (in cents) |
18.99 | 19.13 | (0.7 | ) | 19.17 | 18.84 | 1.8 | |||||||||||||||
| Passenger - Regional Affiliates |
$ | 752 | $ | 765 | (1.7 | ) | $ | 3,098 | $ | 3,063 | 1.1 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
9 | 11 | (18.2 | ) | 28 | 47 | (40.4 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (21 | ) | (100.0 | ) | — | (42 | ) | (100.0 | ) | ||||||||||||
| Regional affiliates adjusted passenger revenue |
$ | 761 | $ | 755 | 0.8 | $ | 3,126 | $ | 3,068 | 1.9 | ||||||||||||
| Adjusted Regional affiliates PRASM (in cents) |
19.22 | 18.88 | 1.8 | 19.34 | 18.82 | 2.8 | ||||||||||||||||
| Consolidated |
||||||||||||||||||||||
| Consolidated passenger revenues |
$ | 4,165 | $ | 4,562 | (8.7 | ) | $ | 18,435 | $ | 18,317 | 0.6 | |||||||||||
| Add: Income from special item |
— | — | — | — | 45 | (100.0 | ) | |||||||||||||||
| Adjusted consolidated passenger revenues |
$ | 4,165 | $ | 4,562 | (8.7 | ) | $ | 18,435 | $ | 18,362 | 0.4 | |||||||||||
| Consolidated available seat miles |
34,816 | 38,948 | (10.6 | ) | 152,025 | 158,191 | (3.9 | ) | ||||||||||||||
| Adjusted consolidated PRASM (in cents) |
11.96 | 11.71 | 2.1 | 12.13 | 11.61 | 4.5 | ||||||||||||||||
| Consolidated passenger revenues |
$ | 4,165 | $ | 4,562 | (8.7 | ) | $ | 18,435 | $ | 18,317 | 0.6 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
48 | 61 | (21.3 | ) | 167 | 277 | (39.7 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (121 | ) | (100.0 | ) | — | (246 | ) | (100.0 | ) | ||||||||||||
| Adjusted consolidated passenger revenues |
$ | 4,213 | $ | 4,502 | (6.4 | ) | $ | 18,602 | $ | 18,348 | 1.4 | |||||||||||
| Adjusted consolidated PRASM (in cents) |
12.10 | 11.56 | 4.7 | 12.24 | 11.60 | 5.5 | ||||||||||||||||
| [c] RASM (In millions) |
||||||||||||||||||||||
| Mainline |
||||||||||||||||||||||
| Consolidated operating revenues |
$ | 4,547 | $ | 5,030 | (9.6 | ) | $ | 20,194 | $ | 20,143 | 0.3 | |||||||||||
| Less: Passenger - Regional Affiliates |
(752 | ) | (765 | ) | (1.7 | ) | (3,098 | ) | (3,063 | ) | 1.1 | |||||||||||
| Less: Regional Affiliates special items |
— | — | — | — | (8 | ) | (100.0 | ) | ||||||||||||||
| Mainline operating revenues |
$ | 3,795 | $ | 4,265 | (11.0 | ) | $ | 17,096 | $ | 17,072 | 0.1 | |||||||||||
| Mainline available seat miles |
30,857 | 34,949 | (11.7 | ) | 135,861 | 141,890 | (4.2 | ) | ||||||||||||||
| Mainline RASM (in cents) |
12.30 | 12.20 | 0.8 | 12.58 | 12.03 | 4.6 | ||||||||||||||||
| Mainline operating revenues |
$ | 3,795 | $ | 4,265 | (11.0 | ) | $ | 17,096 | $ | 17,072 | 0.1 | |||||||||||
| Less: income from special item |
— | — | — | — | (37 | ) | (100.0 | ) | ||||||||||||||
| Adjusted mainline operating revenues |
$ | 3,795 | $ | 4,265 | (11.0 | ) | $ | 17,096 | $ | 17,035 | 0.4 | |||||||||||
| Adjusted mainline RASM (in cents) |
12.30 | 12.20 | 0.8 | 12.58 | 12.01 | 4.7 | ||||||||||||||||
| Adjusted mainline operating revenues |
$ | 3,795 | $ | 4,265 | (11.0 | ) | $ | 17,096 | $ | 17,035 | 0.4 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
39 | 50 | (22.0 | ) | 139 | 230 | (39.6 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (100 | ) | (100.0 | ) | — | (204 | ) | (100.0 | ) | ||||||||||||
| Adjusted mainline operating revenues |
$ | 3,834 | $ | 4,215 | (9.0 | ) | $ | 17,235 | $ | 17,061 | 1.0 | |||||||||||
| Adjusted mainline RASM (in cents) |
12.43 | 12.06 | 3.1 | 12.69 | 12.02 | 5.6 | ||||||||||||||||
| Consolidated |
||||||||||||||||||||||
| Consolidated operating revenues |
$ | 4,547 | $ | 5,030 | (9.6 | ) | $ | 20,194 | $ | 20,143 | 0.3 | |||||||||||
| Less: income from special item |
— | — | — | — | (45 | ) | (100.0 | ) | ||||||||||||||
| Adjusted consolidated operating revenues |
$ | 4,547 | $ | 5,030 | (9.6 | ) | $ | 20,194 | $ | 20,098 | 0.5 | |||||||||||
| Consolidated available seat miles |
34,816 | 38,948 | (10.6 | ) | 152,025 | 158,191 | (3.9 | ) | ||||||||||||||
| Adjusted consolidated RASM (in cents) |
13.06 | 12.91 | 1.2 | 13.28 | 12.70 | 4.6 | ||||||||||||||||
| Adjusted consolidated operating revenues |
$ | 4,547 | $ | 5,030 | (9.6 | ) | $ | 20,194 | $ | 20,098 | 0.5 | |||||||||||
| Add: Mileage Plus - effect of accounting change |
48 | 61 | (21.3 | ) | 167 | 277 | (39.7 | ) | ||||||||||||||
| Less: Mileage Plus - effect of expiration period change |
— | (121 | ) | (100.0 | ) | — | (246 | ) | (100.0 | ) | ||||||||||||
| Adjusted consolidated operating revenues |
$ | 4,595 | $ | 4,970 | (7.5 | ) | $ | 20,361 | $ | 20,129 | 1.2 | |||||||||||
| Adjusted consolidated RASM (in cents) |
13.20 | 12.76 | 3.4 | 13.39 | 12.72 | 5.3 | ||||||||||||||||
17
CONSOLIDATED NOTES (UNAUDITED)
| Three Months Ended December 31, |
% Change |
Twelve Months Ended December 31, |
% Change |
|||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
| [d] Operating Margin (In millions) |
||||||||||||||||||||||
| Consolidated operating earnings (loss) |
$ | (812 | ) | $ | (64 | ) | NM | $ | (4,438 | ) | $ | 1,037 | — | |||||||||
| Less: income from special revenue item |
— | — | — | — | (45 | ) | (100.0 | ) | ||||||||||||||
| Add (less): non-cash, net mark-to-market (gains) losses |
449 | (7 | ) | — | 568 | (20 | ) | — | ||||||||||||||
| Add (less): impairments, special items and other charges |
187 | — | — | 2,807 | (44 | ) | — | |||||||||||||||
| Adjusted operating earnings (loss) |
$ | (176 | ) | $ | (71 | ) | 147.9 | $ | (1,063 | ) | $ | 928 | — | |||||||||
| Consolidated operating revenues |
$ | 4,547 | $ | 5,030 | (9.6 | ) | $ | 20,194 | $ | 20,143 | 0.3 | |||||||||||
| Operating margin (loss) (percent) |
(17.9 | ) | (1.3 | ) | (16.6 | ) pt. | (22.0 | ) | 5.1 | (27.1 | ) pt. | |||||||||||
| Adjusted operating margin (loss) (percent) |
(3.9 | ) | (1.4 | ) | (2.5 | ) pt. | (5.3 | ) | 4.6 | (9.9 | ) pt. | |||||||||||
| [e] Pre-tax income (loss) (In millions) |
||||||||||||||||||||||
| Earnings (loss) before income taxes and equity in earnings of affiliates |
$ | (1,300 | ) | $ | (98 | ) | NM | $ | (5,379 | ) | $ | 695 | — | |||||||||
| Less: income from special revenue item |
— | — | — | — | (45 | ) | (100.0 | ) | ||||||||||||||
| Add (less): non-cash, net mark-to-market (gains) losses |
566 | (7 | ) | — | 847 | (20 | ) | — | ||||||||||||||
| Add (less): impairments, special items and other charges |
187 | — | — | 2,807 | (44 | ) | — | |||||||||||||||
| Adjusted pre-tax earnings (loss) |
$ | (547 | ) | $ | (105 | ) | 421.0 | $ | (1,725 | ) | $ | 586 | — | |||||||||
| Pre-tax earnings (loss) (percent) |
(28.6 | ) | (1.9 | ) | (26.7 | ) pt. | (26.6 | ) | 3.5 | (30.1 | ) pt. | |||||||||||
| Adjusted pre-tax earnings (loss) (percent) |
(12.0 | ) | (2.1 | ) | (9.9 | ) pt. | (8.5 | ) | 2.9 | (11.4 | ) pt. | |||||||||||
| [f] Net income (loss) (In millions) |
||||||||||||||||||||||
| Net income (loss) |
$ | (1,303 | ) | $ | (53 | ) | NM | $ | (5,348 | ) | $ | 403 | — | |||||||||
| Less: income from special revenue item |
— | — | — | — | (45 | ) | (100.0 | ) | ||||||||||||||
| Add (less): non-cash, net mark-to-market (gains) losses |
566 | (7 | ) | — | 847 | (20 | ) | — | ||||||||||||||
| Add (less): impairments, special items and other charges |
187 | — | — | 2,807 | (44 | ) | — | |||||||||||||||
| Add (less): income tax expense (benefit) (i) |
(5 | ) | 3 | — | (31 | ) | 47 | — | ||||||||||||||
| Adjusted net income (loss) |
$ | (555 | ) | $ | (57 | ) | — | $ | (1,725 | ) | $ | 341 | — | |||||||||
| [g] CASM (In millions) |
||||||||||||||||||||||
| Mainline |
||||||||||||||||||||||
| Consolidated operating expenses |
$ | 5,359 | $ | 5,094 | 5.2 | $ | 24,632 | $ | 19,106 | 28.9 | ||||||||||||
| Less: Regional affiliates |
(740 | ) | (765 | ) | (3.3 | ) | (3,248 | ) | (2,941 | ) | 10.4 | |||||||||||
| Mainline operating expenses |
$ | 4,619 | $ | 4,329 | 6.7 | $ | 21,384 | $ | 16,165 | 32.3 | ||||||||||||
| Mainline available seat miles |
30,857 | 34,949 | (11.7 | ) | 135,861 | 141,890 | (4.2 | ) | ||||||||||||||
| Mainline CASM (in cents) |
14.97 | 12.39 | 20.8 | 15.74 | 11.39 | 38.2 | ||||||||||||||||
| Mainline operating expenses |
$ | 4,619 | $ | 4,329 | 6.7 | $ | 21,384 | $ | 16,165 | 32.3 | ||||||||||||
| Add (less): impairments, special items, other charges and non-cash, net mark-to-market (gains) losses |
(636 | ) | 7 | — | (3,375 | ) | 64 | — | ||||||||||||||
| Adjusted mainline operating expense |
$ | 3,983 | $ | 4,336 | (8.1 | ) | $ | 18,009 | $ | 16,229 | 11.0 | |||||||||||
| Adjusted mainline CASM (in cents) |
12.91 | 12.41 | 4.0 | 13.26 | 11.44 | 15.9 | ||||||||||||||||
| Adjusted mainline operating expense |
$ | 3,983 | $ | 4,336 | (8.1 | ) | $ | 18,009 | $ | 16,229 | 11.0 | |||||||||||
| Less: mainline fuel expense (excluding non-cash, net mark-to-market (gains) losses) |
(1,389 | ) | (1,439 | ) | (3.5 | ) | (7,154 | ) | (5,023 | ) | 42.4 | |||||||||||
| Less: cost of third party sales - UAFC (ii) |
1 | (2 | ) | — | (4 | ) | (36 | ) | (88.9 | ) | ||||||||||||
| Adjusted mainline operating expense |
$ | 2,595 | $ | 2,895 | (10.4 | ) | $ | 10,851 | $ | 11,170 | (2.9 | ) | ||||||||||
| Adjusted mainline CASM (in cents) |
8.41 | 8.28 | 1.6 | 7.99 | 7.87 | 1.5 | ||||||||||||||||
| Consolidated |
||||||||||||||||||||||
| Consolidated operating expenses |
$ | 5,359 | $ | 5,094 | 5.2 | $ | 24,632 | $ | 19,106 | 28.9 | ||||||||||||
| Add (less): impairments, special items, other charges and non-cash, net mark-to-market (gains) losses |
(636 | ) | 7 | — | (3,375 | ) | 64 | — | ||||||||||||||
| Adjusted consolidated operating expenses |
$ | 4,723 | $ | 5,101 | (7.4 | ) | $ | 21,257 | $ | 19,170 | 10.9 | |||||||||||
| Consolidated available seat miles |
34,816 | 38,948 | (10.6 | ) | 152,025 | 158,191 | (3.9 | ) | ||||||||||||||
| Adjusted consolidated CASM (in cents) |
13.57 | 13.10 | 3.6 | 13.98 | 12.12 | 15.3 | ||||||||||||||||
| Adjusted consolidated operating expenses |
$ | 4,723 | $ | 5,101 | (7.4 | ) | $ | 21,257 | $ | 19,170 | 10.9 | |||||||||||
| Less: fuel expense (excluding non-cash, net mark-to-market (gains) losses) and UAFC (ii) |
(1,635 | ) | (1,703 | ) | (4.0 | ) | (8,415 | ) | (5,974 | ) | 40.9 | |||||||||||
| Adjusted consolidated operating expenses |
$ | 3,088 | $ | 3,398 | (9.1 | ) | $ | 12,842 | $ | 13,196 | (2.7 | ) | ||||||||||
| Adjusted consolidated CASM (in cents) |
8.87 | 8.72 | 1.7 | 8.45 | 8.34 | 1.3 | ||||||||||||||||
| [h] Operating cash flow (In millions) |
||||||||||||||||||||||
| Operating cash flow |
$ | (989 | ) | $ | 132 | — | $ | (1,239 | ) | $ | 2,134 | — | ||||||||||
| Less: capital expenditures |
(80 | ) | (230 | ) | (65.2 | ) | (415 | ) | (658 | ) | (36.9 | ) | ||||||||||
| Add: proceeds from litigation on advance deposits |
— | — | — | 41 | — | — | ||||||||||||||||
| Free cash flow |
$ | (1,069 | ) | $ | (98 | ) | NM | $ | (1,613 | ) | $ | 1,476 | — | |||||||||
| [i] Loss per share (Basic and diluted) |
||||||||||||||||||||||
| Loss per share - GAAP |
$ | (9.91 | ) | $ | (42.21 | ) | ||||||||||||||||
| Add: non-cash, net mark-to-market losses |
4.30 | 6.68 | ||||||||||||||||||||
| Add: impairments, special items and other charges |
1.39 | 21.90 | ||||||||||||||||||||
| Loss per share - excluding non-cash, net mark-to-market losses and impairments, special items and other charges |
$ | (4.22 | ) | $ | (13.63 | ) | ||||||||||||||||
| (i) | For the three and twelve months ended December 31, 2007, the income tax adjustment for special items is the difference in the income tax provision on actual net income (loss) and the income tax provision on adjusted net income (loss), computed using an effective tax rate of 43%. The Company did not record a tax benefit on the impairments and special items in the three and twelve months ended December 31, 2008, except for $(5) million and $(31) million, respectively, of tax expense (benefits) related to the decreases in indefinite-lived intangible assets, which was calculated using a 37% tax rate. |
| (ii) | Included in UAL’s operating expenses are the expenses of United’s wholly-owned subsidiary United Aviation Fuels Corporation (“UAFC”). UAFC’s expenses are not derived from mainline jet operations; therefore, UAL has excluded these expenses from the above reported GAAP financial measures. |
NM - Not meaningful.
18
CONSOLIDATED NOTES (UNAUDITED)
| (6) | The table below sets forth the estimated exit-related and fresh-start reporting impacts on the Company’s results of operations. |
| 2008 Increase (Decrease) | ||||||||||||||||||||
| (In millions) | 1Q Estimate |
2Q Estimate |
3Q Estimate |
4Q Estimate |
YTD Estimate |
|||||||||||||||
| Revenue impact: | ||||||||||||||||||||
| Mileage Plus revenue |
$ | (65 | ) | $ | (42 | ) | $ | (12 | ) | $ | (48 | ) | $ | (167 | ) [a] | |||||
| Operating expense impact: | ||||||||||||||||||||
| Share-based compensation |
11 | 7 | 5 | 8 | 31 | [b] | ||||||||||||||
| Mileage Plus marketing expense |
5 | 2 | 6 | 3 | 16 | [a] | ||||||||||||||
| Postretirement welfare cost |
14 | 14 | 14 | 14 | 56 | [c] | ||||||||||||||
| Depreciation and amortization |
10 | 10 | 10 | 10 | 40 | [d] | ||||||||||||||
| Deferred gain |
18 | 18 | 18 | 18 | 72 | [e] | ||||||||||||||
| Total operating expense impact |
58 | 51 | 53 | 53 | 215 | |||||||||||||||
| Non-operating expense impact: | ||||||||||||||||||||
| Non-cash and fresh-start interest expense |
$ | 4 | $ | 4 | $ | 4 | $ | 5 | $ | 17 | [f] | |||||||||
| [a] | In connection with its emergence from Chapter 11 protection effective February 1, 2006, the Company adopted fresh-start reporting. Accordingly, the Company elected to change its accounting policy from an incremental cost basis to a deferred revenue model to measure the obligation for the Mileage Plus Frequent Flyer program. Adjustments to the obligation are recorded to operating revenues. Historically, adjustments were based upon incremental costs and were recorded in both operating revenues and advertising expense. |
The deferred revenue model is more volatile than the incremental cost basis. Because all miles are now accounted for under the deferred revenue model, the amount of revenue recognized is more sensitive to the number of miles earned and redeemed during the period than the incremental cost basis.
| [b] | In accordance with the plan of reorganization, the Company implemented stock-based compensation plans for certain management employees and non-employee directors. The Company adopted SFAS 123R effective January 1, 2006 and recorded compensation expense for such plans. |
| [c] | In accordance with fresh-start reporting, the Company revalued its liabilities effective February 1, 2006 to fair value. As a result, all prior period service credits related to postretirement costs were eliminated. |
| [d] | In accordance with fresh-start reporting, the Company revalued its assets to fair value effective February 1, 2006. As a result, definite lived intangible asset values increased substantially which results in higher associated amortization expense. In addition, the value of the Company’s operating property and equipment was significantly reduced which results in lower depreciation expense. The Company has estimated the net impact of changes in asset values at fresh-start on net depreciation and amortization. |
| [e] | In accordance with fresh-start reporting, the Company revalued its liabilities effective February 1, 2006 to fair value. As a result, all deferred gains on aircraft sale/leasebacks were eliminated. |
| [f] | As a result of fresh-start reporting, the Company recognizes certain non-cash interest expenses, including the amortization of mark-to-market discounts on all debt and capital leases. |
| (7) | The following table presents additional detail on the Mileage Plus impacts summarized in the table above. These items consist of the additional amount of revenue that the Company estimates would have been recognized had we continued to apply the incremental cost method of accounting after exiting bankruptcy and, for 2007, the estimated impact of the change in the expiration period for inactive accounts from 36 months to 18 months. The Company utilizes this adjustment for comparison of its performance to its peers, as certain of our peers currently still apply the incremental cost method of accounting. |
| Increase (Decrease) | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||||||||||||||||||||||||
| (In millions) | 1Q | 2Q | 3Q | 4Q | YTD | 1Q | 2Q | 3Q | 4Q | YTD | ||||||||||||||||||||||||||||||
| Mainline | ||||||||||||||||||||||||||||||||||||||||
| Effect of accounting change |
$ | (54 | ) | $ | (35 | ) | $ | (11 | ) | $ | (39 | ) | $ | (139 | ) | $ | (113 | ) | $ | (37 | ) | $ | (30 | ) | $ | (50 | ) | $ | (230 | ) | ||||||||||
| Effect of expiration period change |
— | — | — | — | — | 23 | 39 | 42 | 100 | 204 | ||||||||||||||||||||||||||||||
| Total Mainline |
(54 | ) | (35 | ) | (11 | ) | (39 | ) | (139 | ) | (90 | ) | 2 | 12 | 50 | (26 | ) | |||||||||||||||||||||||
| Regional Affiliates | ||||||||||||||||||||||||||||||||||||||||
| Effect of accounting change |
(11 | ) | (7 | ) | (1 | ) | (9 | ) | (28 | ) | (22 | ) | (9 | ) | (5 | ) | (11 | ) | (47 | ) | ||||||||||||||||||||
| Effect of expiration period change |
— | — | — | — | — | 5 | 8 | 8 | 21 | 42 | ||||||||||||||||||||||||||||||
| Total Regional Affiliates |
(11 | ) | (7 | ) | (1 | ) | (9 | ) | (28 | ) | (17 | ) | (1 | ) | 3 | 10 | (5 | ) | ||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||||||||||
| Effect of accounting change |
(65 | ) | (42 | ) | (12 | ) | (48 | ) | (167 | ) | (135 | ) | (46 | ) | (35 | ) | (61 | ) | (277 | ) | ||||||||||||||||||||
| Effect of expiration period change |
— | — | — | — | — | 28 | 47 | 50 | 121 | 246 | ||||||||||||||||||||||||||||||
| Total Consolidated |
$ | (65 | ) | $ | (42 | ) | $ | (12 | ) | $ | (48 | ) | $ | (167 | ) | $ | (107 | ) | $ | 1 | $ | 15 | $ | 60 | $ | (31 | ) | |||||||||||||
19
CONSOLIDATED NOTES (UNAUDITED)
| (8) | Pursuant to SEC Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. Further, the Company believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. The Company also believes that adjusting for impairments and other charges is useful to investors because they are non-recurring income and/or charges that are not indicative of the Company’s on-going performance. |
The forecasted fuel amounts shown below were estimated based on forecasted jet fuel prices, including estimated hedge impacts, of $1.83 per gallon and $1.87 per gallon for the first quarter and the full year of 2009, respectively.
| Three Months Ending March 31, |
Twelve Months Ending December 31, |
|||||||||||||||||||||||||||||
| 2009 Estimate | 2008 Actual |
YOY | 2009 Estimate | 2008 Actual |
YOY % Change |
|||||||||||||||||||||||||
| Operating expense per ASM - CASM (cents)(i) |
Low | High | % Change | Low | High | |||||||||||||||||||||||||
| Mainline operating expense |
— | — | 12.67 | — | — | — | — | 15.74 | — | — | ||||||||||||||||||||
| Less: profit sharing programs |
— | — | — | — | — | — | — | (0.04 | ) | — | — | |||||||||||||||||||
| Mainline excluding profit sharing programs |
11.38 | 11.46 | 12.67 | (10.2 | ) | (9.6 | ) | 11.17 | 11.25 | 15.70 | (28.9 | ) | (28.3 | ) | ||||||||||||||||
| Less: fuel expense & cost of third party sales - UAFC |
(2.97 | ) | (2.97 | ) | (4.57 | ) | (35.0 | ) | (35.0 | ) | (3.02 | ) | (3.02 | ) | (5.68 | ) | (46.8 | ) | (46.8 | ) | ||||||||||
| Mainline excluding profit sharing, fuel & UAFC |
8.41 | 8.49 | 8.10 | 3.8 | 4.8 | 8.15 | 8.23 | 10.02 | (18.7 | ) | (17.9 | ) | ||||||||||||||||||
| Add (less): impairments and other charges and special items |
— | — | (0.01 | ) | — | — | — | — | (2.07 | ) | — | — | ||||||||||||||||||
| Mainline excluding profit sharing, fuel, UAFC, impairments and other charges and special items |
8.41 | 8.49 | 8.09 | 4.0 | 5.0 | 8.15 | 8.23 | 7.95 | 2.5 | 3.5 | ||||||||||||||||||||
| Consolidated operating expense |
— | — | 13.41 | — | — | — | — | 16.20 | — | — | ||||||||||||||||||||
| Less: profit sharing programs |
— | — | — | — | — | — | — | (0.03 | ) | — | — | |||||||||||||||||||
| Consolidated excluding profit sharing programs |
12.04 | 12.13 | 13.41 | (10.2 | ) | (9.5 | ) | 11.84 | 11.92 | 16.17 | (26.8 | ) | (26.3 | ) | ||||||||||||||||
| Less: fuel expense & cost of third party sales - UAFC |
(3.13 | ) | (3.13 | ) | (4.83 | ) | (35.2 | ) | (35.2 | ) | (3.22 | ) | (3.22 | ) | (5.91 | ) | (45.5 | ) | (45.5 | ) | ||||||||||
| Consolidated excluding profit sharing, fuel & UAFC |
8.91 | 9.00 | 8.58 | 3.8 | 4.9 | 8.62 | 8.70 | 10.26 | (16.0 | ) | (15.2 | ) | ||||||||||||||||||
| Add (less): impairments and other charges and special items |
— | — | (0.01 | ) | — | — | — | — | (1.85 | ) | — | — | ||||||||||||||||||
| Consolidated excluding fuel, UAFC, impairments and other charges and special items |
8.91 | 9.00 | 8.57 | 4.0 | 5.0 | 8.62 | 8.70 | 8.41 | 2.5 | 3.5 | ||||||||||||||||||||
| (i) | CASM also excludes the impact of future special items and other charges, including profit sharing, as these items are unknown and cannot be predicted with certainty. |
| (9) | The table below details the Company’s hedge positions as of January 16, 2009. |
| Hedging Instrument |
% of Expected |
% of Expected |
Average Price Where Payment Obligations Stop |
Average Price Where Payment Obligations Begin |
Average Price Where Protection Begins |
Average Price Where Protection Ends | |||||||||||
| 1st Quarter 2009 |
|||||||||||||||||
| Calls |
18% | 21% | N/A | N/A | $ | 77 bbl | (ii) | N/A | |||||||||
| Collars |
9% (10%) | 11% (12%) | N/A | $ | 109 bbl | $ | 118 bbl | N/A | |||||||||
| 3-Way Collars |
25% (29%) | 30% (35%) | N/A | $ | 104 bbl | $ | 118 bbl | $ | 143 bbl | ||||||||
| 4-Way Collars |
2% | 2% | $ | 63 bbl | $ | 78 bbl | $ | 95 bbl | $ | 135 bbl | |||||||
| 1st Quarter 2009 Total |
54% | 64% | N/A | $ | 104 bbl | $ | 104 bbl | N/A | |||||||||
| 1st Quarter 2009 Purchased Puts to Cap Downside Purchased Puts |
35% | 42% | $ | 57 | |||||||||||||
| Full Year 2009 |
|||||||||||||||||
| Calls |
12% | 14% | N/A | N/A | $ | 76 bbl | (iii) | N/A | |||||||||
| Collars |
5% (6%) | 6% (7%) | N/A | $ | 111 bbl | $ | 123 bbl | N/A | |||||||||
| 3-Way Collars |
18% (22%) | 22% (26%) | N/A | $ | 102 bbl | $ | 117 bbl | $ | 147 bbl | ||||||||
| 4-Way Collars |
1% | 2% | $ | 63 bbl | $ | 78 bbl | $ | 95 bbl | $ | 135 bbl | |||||||
| Full Year 2009 Total |
36% | 44% | N/A | $ | 103 bbl | $ | 104 bbl | N/A | |||||||||
| Full Year 2009 Purchased Puts to Cap Downside Purchased Puts |
17% | 20% | $ | 54 | |||||||||||||
| (i) | % of expected mainline and consolidated consumption represents the notional amount of purchased calls in the hedge structures. Certain 3-way collars and collars included in the table above have sold puts with twice the notional amount of the purchased calls. The % in parentheses represent the notional amount of sold puts in these hedge structures. |
| (ii) | Call position average includes the following two groupings of positions: 9% of consolidated consumption with protection beginning at $106 per barrel; and 9% of consolidated consumption beginning at $50 per barrel. |
| (iii) | Call position average includes the following two groupings of positions: 5% of consolidated consumption with protection beginning at $106 per barrel; and 7% of consolidated consumption beginning at $53 per barrel. |
| (10) | The table below outlines the Company’s estimated collateral provisions at various crude oil prices, based on the hedge portfolio as of January 16, 2009. |
| Price of Crude Oil, in Dollars per Barrel |
Approximate Change in Cash Collateral For Each $5 per Barrel Change in the Price of Crude Oil | ||
| Above $105 |
No Collateral Required | ||
| At or Above $85, but Below $105 |
$ | 45 million | |
| At or Above $25, but Below $85 |
$ | 60 million | |
| Below $25 |
$ | 40 million | |
For example, using the table above, at an illustrative $35 per barrel the Company’s required collateral provision to its derivative counterparties would be approximately $780 million.
20
UAL CORPORATION AND SUBSIDIARY COMPANIES
(Mainline and Regional Affiliates (a))
| Three Months Ended December 31, |
% Change |
||||||||
| 2008 | 2007 | ||||||||
| Mainline revenue passengers (In thousands) |
14,147 | 16,042 | (11.8 | ) | |||||
| Revenue passenger miles - RPM (In millions) |
|||||||||
| Mainline |
24,517 | 27,890 | (12.1 | ) | |||||
| Regional affiliates |
3,003 | 3,013 | (0.3 | ) | |||||
| Consolidated |
27,520 | 30,903 | (10.9 | ) | |||||
| Available seat miles - ASM (In millions) |
|||||||||
| Mainline |
30,857 | 34,949 | (11.7 | ) | |||||
| Regional affiliates |
3,959 | 3,999 | (1.0 | ) | |||||
| Consolidated |
34,816 | 38,948 | (10.6 | ) | |||||
| Passenger load factor (percent) |
|||||||||
| Mainline |
79.5 | 79.8 | (0.3) pt. | ||||||
| Regional affiliates |
75.9 | 75.3 | 0.6 pt. | ||||||
| Consolidated |
79.0 | 79.3 | (0.3) pt. | ||||||
| Consolidated operating breakeven passenger load factor (percent) |
94.5 | 80.5 | 14.0 pt. | ||||||
| Passenger revenue per passenger mile - Yield (cents) [See Note 5a] |
|||||||||
| Mainline adjusted |
13.88 | 13.57 | 2.3 | ||||||
| Mainline adjusted for Mileage Plus |
14.04 | 13.40 | 4.8 | ||||||
| Regional affiliates |
25.04 | 25.39 | (1.4 | ) | |||||
| Regional affiliates adjusted for Mileage Plus |
25.34 | 25.06 | 1.1 | ||||||
| Consolidated adjusted |
15.09 | 14.73 | 2.4 | ||||||
| Consolidated adjusted for Mileage Plus |
15.27 | 14.53 | 5.1 | ||||||
| Passenger revenue per available seat mile - PRASM (cents) [See Note 5b] |
|||||||||
| Mainline |
11.06 | 10.86 | 1.8 | ||||||
| Mainline adjusted for Mileage Plus |
11.19 | 10.72 | 4.4 | ||||||
| Regional affiliates |
18.99 | 19.13 | (0.7 | ) | |||||
| Regional affiliates adjusted for Mileage Plus |
19.22 | 18.88 | 1.8 | ||||||
| Consolidated |
11.96 | 11.71 | 2.1 | ||||||
| Consolidated adjusted for Mileage Plus |
12.10 | 11.56 | 4.7 | ||||||
| Operating revenue per available seat mile - RASM (cents) [See Note 5c] |
|||||||||
| Mainline |
12.30 | 12.20 | 0.8 | ||||||
| Mainline adjusted for Mileage Plus |
12.43 | 12.06 | 3.1 | ||||||
| Regional affiliates |
18.99 | 19.13 | (0.7 | ) | |||||
| Regional affiliates adjusted for Mileage Plus |
19.22 | 18.88 | 1.8 | ||||||
| Consolidated |
13.06 | 12.91 | 1.2 | ||||||
| Consolidated adjusted for Mileage Plus |
13.20 | 12.76 | 3.4 | ||||||
| Operating expense per available seat mile - CASM (cents) [See Note 5g] |
|||||||||
| Mainline |
14.97 | 12.39 | 20.8 | ||||||
| Mainline excluding impairments, special items, other charges and non-cash, net mark-to-market (gains) losses |
12.91 | 12.41 | 4.0 | ||||||
| Mainline excluding impairments, other special items, fuel & UAFC |
8.41 | 8.28 | 1.6 | ||||||
| Regional affiliates |
18.69 | 19.13 | (2.3 | ) | |||||
| Consolidated |
15.39 | 13.08 | 17.7 | ||||||
| Consolidated excluding impairments, special items, other charges and non-cash, net mark-to-market (gains) losses |
13.57 | 13.10 | 3.6 | ||||||
| Consolidated excluding impairments, other special items, fuel & UAFC |
8.87 | 8.72 | 1.7 | ||||||
| Mainline unit earnings (loss) (cents) (b) |
(2.67 | ) | (0.19 | ) | NM | ||||
| Mainline unit earnings excluding impairments, special items and other charges (including non-cash, net mark-to-market (gains) losses), fuel & UAFC (cents) (b) |
3.89 | 3.92 | (0.8 | ) | |||||
| Number of aircraft in operating fleet at end of period |
|||||||||
| Mainline |
409 | 460 | (11.1 | ) | |||||
| Regional affiliates |
280 | 279 | 0.4 | ||||||
| Consolidated |
689 | 739 | (6.8 | ) | |||||
| Other Mainline Statistics |
|||||||||
| Mainline average price per gallon of jet fuel (cents) |
374.3 | 253.0 | 47.9 | ||||||
| Mainline average price per gallon of jet fuel excluding non-cash, net mark-to-market (gains) losses (cents) |
282.9 | 254.2 | 11.3 | ||||||
| Average full-time equivalent employees (thousands) |
45.9 | 51.7 | (11.2 | ) | |||||
| Mainline ASMs per equivalent employee - productivity (thousands) |
672 | 676 | (0.6 | ) | |||||
| Average stage length (in miles) |
1,400 | 1,381 | 1.4 | ||||||
| Fleet utilization (in hours and minutes) |
10:05 | 10:42 | (5.8 | ) | |||||
| (a) | Mainline includes United Air Lines, Inc. scheduled and chartered jet operations. Regional affiliates include operations from regional carriers with whom the Company has entered into capacity purchase agreements to provide jet and turboprop operations branded as United Express. |
| (b) | Unit earnings are calculated as RASM minus CASM. |
NM - Not meaningful
21
UAL CORPORATION AND SUBSIDIARY COMPANIES
(Mainline and Regional Affiliates (a))
| Twelve Months Ended December 31, |
% Change |
|||||||
| 2008 | 2007 | |||||||
| Mainline revenue passengers (In thousands) |
63,149 | 68,386 | (7.7 | ) | ||||
| Revenue passenger miles - RPM (In millions) |
||||||||
| Mainline |
110,061 | 117,399 | (6.3 | ) | ||||
| Regional affiliates |
12,155 | 12,649 | (3.9 | ) | ||||
| Consolidated |
122,216 | 130,048 | (6.0 | ) | ||||
| Available seat miles - ASM (In millions) |
||||||||
| Mainline |
135,861 | 141,890 | (4.2 | ) | ||||
| Regional affiliates |
16,164 | 16,301 | (0.8 | ) | ||||
| Consolidated |
152,025 | 158,191 | (3.9 | ) | ||||
| Passenger load factor (percent) |
||||||||
| Mainline |
81.0 | 82.7 | (1.7 | )pt. | ||||
| Regional affiliates |
75.2 | 77.6 | (2.4 | )pt. | ||||
| Consolidated |
80.4 | 82.2 | (1.8 | )pt. | ||||
| Consolidated operating breakeven passenger load factor (percent) |
99.8 | 77.6 | 22.2 | pt. | ||||
| Passenger revenue per passenger mile - Yield (cents) [See Note 5a] |
||||||||
| Mainline adjusted |
13.89 | 12.99 | 6.9 | |||||
| Mainline adjusted for special items |
13.89 | 12.95 | 7.3 | |||||
| Mainline adjusted for special items and Mileage Plus |
14.02 | 12.98 | 8.0 | |||||
| Regional affiliates |
25.49 | 24.28 | 5.0 | |||||
| Regional affiliates adjusted for special items |
25.49 | 24.22 | 5.2 | |||||
| Regional affiliates adjusted for special items and Mileage Plus |
25.72 | 24.25 | 6.1 | |||||
| Consolidated adjusted |
15.05 | 14.08 | 6.9 | |||||
| Consolidated adjusted for special items |
15.05 | 14.05 | 7.1 | |||||
| Consolidated adjusted for special items and Mileage Plus |
15.18 | 14.07 | 7.9 | |||||
| Passenger revenue per available seat mile - PRASM (cents) [See Note 5b] |
||||||||
| Mainline |
11.29 | 10.78 | 4.7 | |||||
| Mainline adjusted for special items |
11.29 | 10.75 | 5.0 | |||||
| Mainline adjusted for special items and Mileage Plus |
11.39 | 10.77 | 5.8 | |||||
| Regional affiliates |
19.17 | 18.84 | 1.8 | |||||
| Regional affiliates adjusted for special items |
19.17 | 18.79 | 2.0 | |||||
| Regional affiliates adjusted for special items and Mileage Plus |
19.34 | 18.82 | 2.8 | |||||
| Consolidated |
12.13 | 11.61 | 4.5 | |||||
| Consolidated adjusted for special items |
12.13 | 11.58 | 4.7 | |||||
| Consolidated adjusted for special items and Mileage Plus |
12.24 | 11.60 | 5.5 | |||||
| Operating revenue per available seat mile - RASM (cents) [See Note 5c] |
||||||||
| Mainline |
12.58 | 12.03 | 4.6 | |||||
| Mainline adjusted for special items |
12.58 | 12.01 | 4.7 | |||||
| Mainline adjusted for special items and Mileage Plus |
12.69 | 12.02 | 5.6 | |||||
| Regional affiliates |
19.17 | 18.84 | 1.8 | |||||
| Regional affiliates adjusted for special items |
19.17 | 18.79 | 2.0 | |||||
| Regional affiliates adjusted for special items and Mileage Plus |
19.34 | 18.82 | 2.8 | |||||
| Consolidated |
13.28 | 12.73 | 4.3 | |||||
| Consolidated adjusted for special items |
13.28 | 12.70 | 4.6 | |||||
| Consolidated adjusted for special items and Mileage Plus |
13.39 | 12.72 | 5.3 | |||||
| Operating expense per available seat mile - CASM (cents) [See Note 5g] |
||||||||
| Mainline |
15.74 | 11.39 | 38.2 | |||||
| Mainline excluding impairments, special items, other charges and non-cash, net mark-to-market (gains) losses |
13.26 | 11.44 | 15.9 | |||||
| Mainline excluding impairments, other special items, fuel & UAFC |
7.99 | 7.87 | 1.5 | |||||
| Regional affiliates |
20.09 | 18.04 | 11.4 | |||||
| Consolidated |
16.20 | 12.08 | 34.1 | |||||
| Consolidated excluding impairments, special items, other charges and non-cash, net mark-to-market (gains) losses and other special items |
13.98 | 12.12 | 15.3 | |||||
| Consolidated excluding impairments, other special items, fuel & UAFC |
8.45 | 8.34 | 1.3 | |||||
| Mainline unit earnings (loss) (cents) (b) |
(3.16 | ) | 0.64 | — | ||||
| Mainline unit earnings excluding special revenue items, impairments, special items and other charges (including non-cash, net mark-to-market (gains) losses), fuel & UAFC (cents) (b) |
4.59 | 4.14 | 10.9 | |||||
| Number of aircraft in operating fleet at end of period |
||||||||
| Mainline |
409 | 460 | (11.1 | ) | ||||
| Regional affiliates |
280 | 279 | 0.4 | |||||
| Consolidated |
689 | 739 | (6.8 | ) | ||||
| Other Mainline Statistics |
||||||||
| Mainline average price per gallon of jet fuel (cents) |
353.9 | 218.3 | 62.1 | |||||
| Mainline average price per gallon of jet fuel excluding non-cash, net mark-to-market (gains) losses (cents) |
327.9 | 219.2 | 49.6 | |||||
| Average full-time equivalent employees (thousands) |
49.6 | 51.6 | (3.9 | ) | ||||
| Mainline ASMs per equivalent employee - productivity (thousands) |
2,739 | 2,750 | (0.4 | ) | ||||
| Average stage length (in miles) |
1,402 | 1,371 | 2.3 | |||||
| Fleet utilization (in hours and minutes) |
10:42 | 11:00 | (2.7 | ) | ||||
| (a) | Mainline includes United Air Lines, Inc. scheduled and chartered jet operations. Regional affiliates include operations from regional carriers with whom the Company has entered into capacity purchase agreements to provide jet and turboprop operations branded as United Express. |
| (b) | Unit earnings are calculated as RASM minus CASM. |
NM - Not meaningful
22